Copper gathers strength

Prices rise on anticipation of higher demand from China and US

Copper prices ended higher on Friday, 01 October at Comex. Prices rose riding on the back of strong economic data both at home and at China. Prices also rose due to the weak dollar.



At USA, copper futures for December delivery ended higher by 4 cents (1.1%) at $3.69 a pound on Friday. For the week, copper prices gained 1.5%. For September, copper rose 8.3%. That follows 1.5% gains in August and 12% in July. For the third quarter, copper ended higher by 24%. Prices have increased by 27.6% in the past one year.

On Friday, at LME, copper for delivery in three months ended higher by $70 (0.8%) at $8,078. Before Thursday, prices had crossed the $8,000 mark for first time since 2008 on 6 April 2010. On 3 July, 2008, prices had touched an all time intra day high of $8,940. Copper ended FY 2009 higher by 140%.

As per latest report, China's government-backed purchasing managers' index rose to 53.8 from 51.7 in August. The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.

In the currency market on Friday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies dropped by 0.7%. The dollar dropped as traders mulled over the fact that Federal Reserve might pump more money into the system.

Among economic data expected for the day at US, The Institute for Supply Management said its index of factory activity fell to 54.4% in September from 56.3% in August. ISM was expected to decline to 54.0%. Readings over 50% indicate that more firms are growing than contracting. Also, The Reuters/University of Michigan's final gauge of consumer sentiment was upwardly revised to 68.2 in September from an initial reading of 66.6, beating expectations of 67.2.

Additionally, the Commerce Department reported on Friday, 01 October 2010 that incomes grew faster than spending in August 2010, pushing up the nation's personal savings rate. With income rising faster than spending, the personal savings rate rose to 5.8% of disposable income from 5.7% in July.

Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.

Among other metals traded in the LME on Friday, lead ended 0.4% lower at $2,270 a ton and zinc ended 0.2% higher at $2,200 a ton. Nickel was little changed at $23,399. Aluminum was little changed at $2,351 a ton.